In the US market with rising house prices and falling inventory, both homebuyers and landlords struggle. However, within the difficult national picture, certain areas stand out as beacons for US buy-to-let property. Bringing together high population growth, strong employment and undervalued property, the best places to be a landlord centre around Texas and Florida.
A report by the real estate sales and home construction company Ten-X looks at US buy-to-let property across the board. It pinpoints those areas where being a landlord is a “lucrative option”. Criteria for good buy-to-let potential include favourable demographics, job creation and property values with room for growth.
Texas comes out on top
“If you look at our report, probably eight or nine of the top 20 markets in terms of housing performance are in either Texas or Florida,” said Rick Sharga, executive vice president at Ten-X.
The two states tick all the right boxes for rental demand, although Texas dominates the top five. The Lone Star cities of San Antonio, Fort William and Dallas take the top three places in the best places for US buy-to-let property.
San Antonio takes first place for its strong population growth and all-time high employment creation. Dallas features third on the list because of the city’s recent technological and financial services boom.
Ten-X points out that although the Texas property market has seen high price rises over the last year, home values remain lower than other markets. California currently has one of the hottest markets in the US, but high property prices reduce the potential for returns from rentals.
Florida a close second
The Sunshine state also does well in the ranking for the best buy-to-let property in the US. Tampa features in fifth place and scores for low entry costs and high returns. The Tampa metro area was particularly hard hit by the property crash and prices still hover well below their peak. In Q3 this year, single family properties in Tampa went up by 9.8% to reach a median price of US$225,000. Condo and townhouse properties rose by 11.1% to US$150,000.
The Ten-X report also highlights Tampa’s “downtown resurgence”. The metro area is currently undergoing major new redevelopment in both the residential and commercial property sectors.
Tourism too is on a high. Terminal 6 at Port Tampa Bay has just completed refurbishment and upgrades to the tune of US$1.7 million. Cruise passenger capacity at the terminal has gone up by almost a third to 2,500.
Orlando, another Florida hotspot, sits in sixth place in the Ten-X ranking. The metro area has strong population growth, booming employment and a shortage of homes. Orlando’s real estate market has higher values than Tampa, but property still has room for growth. Prices for single family homes in Q3 rose by 7.8% to a median of US$247,900. Those for condo and townhouse properties soared by 18.7% to US$154,250, on a par with those in Tampa.
New model for US buy-to-let property
The full recovery of the property market has changed the buy-to-let scenario in the US. As the Ten-X report points out, “there’s no longer a steady stream of low-priced, foreclosed homes”.
In the light of this, landlords are now concentrating on making money from rental income as their principal return. “In some cases they may even be slightly overpaying for properties,” said Sharga, “but they’re making it up in the rental income over time”. With strong demographics and employment, Texas and Florida appear to be where it’s at for US buy-to-let property.